23 April 2012

ST-Ericsson retrenches as it looks to turn losses around

Following a period of heavy losses, mobile semiconductor company ST-Ericsson has announced what it calls a new strategic direction. As part of the new focus, the company will focus on IP development and product integration, with technology development outsourced.

While the company says it still wants to be a leader in smartphone and tablet platforms, it has repositioned itself dramatically. Overall, the plan is expected to see 1700 job losses at a cost of up to $150million, but will save more than $300m a year.
Didier Lamouche, pictured, the company's president and ceo, said: "ST-Ericsson has a unique ability to develop and integrate complete mobile platforms for mainstream smartphones and tablets. This will be our strategic focus moving forward, while continuing to master leading edge modem IPs. We believe this is the best way to deliver those world class technologies and services that our customers are expecting in order to shape tomorrow's mobility and connected world."
As a first step, ST-Ericsson will partner with STMicroelectronics in the development of future application processors. As part of the deal, ST-Ericsson will transfer its application processor R&D activity and employees to STMicroelectronics. It will then license the the application processor for integration in ModAp platforms for smartphones and tablets.
The company will also focus on improving R&D execution and accelerating time to market, while reducing operating expenses. Activities will be consolidated into a 'significantly smaller' number of sites, which will be refocused as 'centres of excellence'. Larger sites will integrate a wider portion of the smartphone platform value chain, with a view to optimizing time-to-market and delivery efficiency.
Additionally, it is looking to cut overheads by about 25% by streamlining the general and administrative activities and reducing 'substantially' positions within the top paid management.
This plan will see the company cutting its workforce by 1700 employees, including those transferring to ST. The plan is expected to save $320million a year, but to incur restructuring costs of up to $150m.
"By concentrating our efforts on our differentiators and partnering where appropriate," Lamouche concluded, "ST-Ericsson can deliver the products our customers want, while ensuring full continuity of our existing roadmap."

Graham Pitcher

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